Valeant investors pressure Pearson for a new plan

Fri Dec 11, 2015 3:00pm EST
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By Caroline Humer, Carl O'Donnell and Svea Herbst-Bayliss

NEW YORK/BOSTON (Reuters) - Valeant Pharmaceuticals International Inc (VRX.TO: Quote) investors are turning up the pressure on the drugmaker to produce a detailed plan on how it will deliver profit growth in 2016.

Chief Executive Officer Michael Pearson will hold a meeting next week for hundreds of investors for the first time since the Canadian company has come under fire over steep price hikes for its drugs and billing practices at closely linked pharmacy Philidor Rx Services.

Valeant has cut ties with Philidor, which used aggressive tactics to get insurers to reimburse the costs of the company's dermatology medicines. The pharmacy is closing down, and Valeant's board has opened an investigation.

The negative news about Philidor pushed Valeant shares down 75 percent in the last four months, but investors say they see signs that the company is containing the damage from outside investigations by U.S. lawmakers, prosecutors and investors.

In interviews with Reuters, three major Valeant investors and four of its smaller shareholders said the task for the company is to commit to growth and demonstrate how it will get there.

    One investor, who requested anonymity, said he had sold his Valeant shares in the summer and was waiting for the meeting to decide whether to buy in again.

Investors said Wall Street wanted three things from Wednesday's meeting: a 2016 forecast for earnings around $14 per share versus the $11 projected for 2015, no more bad news or surprises, and a new plan for selling dermatology products through specialty pharmacies.

Another investor who asked for anonymity said Valeant must lay out a strong rationale on how it will achieve the 2016 earnings. He said he would prefer a forecast of $12 per share with a clear description of how it will sustain that than $14 based on overly optimistic projections.   Continued...

The headquarters of Valeant Pharmaceuticals International Inc., seen in Laval, Quebec November 9 2015.   Valeant CEO Michael Pearson has come under increasing pressure as the company's stock plunged from $263.70 on Aug. 5 to below $80 last week on scrutiny over high price markups for its drugs and accusations it used a specialty pharmacy, Philidor Rx Services, to inflate revenue. REUTERS/Christinne Muschi